Correlation Between Vanguard Wellington and Vanguard Star
Can any of the company-specific risk be diversified away by investing in both Vanguard Wellington and Vanguard Star at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Vanguard Wellington and Vanguard Star into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Wellington Fund and Vanguard Star Fund, you can compare the effects of market volatilities on Vanguard Wellington and Vanguard Star and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Vanguard Wellington with a short position of Vanguard Star. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Wellington and Vanguard Star.
Diversification Opportunities for Vanguard Wellington and Vanguard Star
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and Vanguard is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Wellington Fund and Vanguard Star Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Star and Vanguard Wellington is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Vanguard Wellington Fund are associated (or correlated) with Vanguard Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Star has no effect on the direction of Vanguard Wellington i.e., Vanguard Wellington and Vanguard Star go up and down completely randomly.
Pair Corralation between Vanguard Wellington and Vanguard Star
Assuming the 90 days horizon Vanguard Wellington Fund is expected to under-perform the Vanguard Star. In addition to that, Vanguard Wellington is 1.55 times more volatile than Vanguard Star Fund. It trades about -0.11 of its total potential returns per unit of risk. Vanguard Star Fund is currently generating about -0.09 per unit of volatility. If you would invest 2,946 in Vanguard Star Fund on November 29, 2024 and sell it today you would lose (129.00) from holding Vanguard Star Fund or give up 4.38% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 98.33% |
Values | Daily Returns |
Vanguard Wellington Fund vs. Vanguard Star Fund
Performance |
Timeline |
Vanguard Wellington |
Vanguard Star |
Vanguard Wellington and Vanguard Star Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Vanguard Wellington and Vanguard Star
The main advantage of trading using opposite Vanguard Wellington and Vanguard Star positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Wellington position performs unexpectedly, Vanguard Star can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Vanguard Star will offset losses from the drop in Vanguard Star's long position.Vanguard Wellington vs. Vanguard Wellesley Income | ||
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Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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